Ian Bremmer Explains What's REALLY Going On Between China And Japan And The One Issue No One Is Talking About

Chinese sailors stand at attention as the Chinese frigate Yancheng comes in to dock at Limassol port, January 4, 2014. REUTERS/Andreas Manolis

The dominant theme of the World Economic Forum in Davos is geopolitics. Specifically, there's a lot of interest in the mounting tensions between Japan and China and there's a lot of interest in Iran, where the new president, Hassan Rouhani, made something of a star appearance.

To make sense of it all, we sat down with Ian Bremmer of the Eurasia Group, which specializes in analyzing political risk for clients all over the world.

According to Bremmer, the risks mounting between China and Asia are indeed very real.

As he sees it, China is trying to test the Obama administration, taking advantage of the facts that there are no particularly strong China hawks in the administration. Part of their strategy, he argues, is to drive a wedge between Washington and Japan.

"So far the China strategy has been pretty successful," Bremmer says.

During our talk he brought up an incident that occurred at a panel where an official member of the Chinese delegation identified Kim Jong-un and Shinzo Abe as the two malefactors in the region. Bremmer notes that the panelist is a representative of the government, and that he wouldn't say anything that wasn't the official government stance. As such you need to take this rhetoric seriously. Bremmer doesn't see war as likely, but if there is an "accident" then given the tensions both sides will assume the other side had the worst intentions.

On Iran, he explained why he's an optimist on the new political regime, and their seriousness about improving their relationship with the world.

Joe Weisenthal, Business Insider How real are the China-Japan tensions?

Look, I think it's very real. Japan is focusing on the economic front, there's no question. And Prime Minister Abe just came, he gave a great speech. Folks are optimistic about the economy. The one part of the speech that people were really concerned about was Japan-China. And understandably. He's criticizing the Chinese as being aggressive and militaristic. He compared Japan-China relations explicitly to relations between Germany and the U.K in 1914, where the economic relations were good but the security tensions, let's say, were not so good. And we saw what happened there.

I wouldn't say that Abe was directly raising the specter of war, but he was saying that China is acting in a manner that's unacceptable and Japan won't tolerate it. And certainly Abe's preference is to change Japan's constitution, it's to remilitarize. He does believe that the global conditions that led to the constitution that Japan signed over a half-century ago no longer apply. And indeed are potentially destabilizing in East Asia. The Chinese, for their part, they don't have a big delegation here. And they don't anymore, now they do the summer Davos in China because they can dominate that conversation and here they get too much criticism. But they're have been some senior Chinese here and they have absolutely been extremely hawkish on this issue. There was a panel on global security that I attended, one of the top members of the China delegation said that there were two troublemakers in East Asia: Shinzo Abe and Kim Jong Un. And this is not a guy who is allowed to criticize the government. He would not make that statement if it were not acceptable to the Chinese government.

There was a panel on global security that I attended, one of the top members of the China delegation said that there were two troublemakers in East Asia: Shinzo Abe and Kim Jong Un. And this is not a guy who is allowed to criticize the government. He would not make that statement if it were not acceptable to the Chinese government.

What is China's strategy?

Their strategy is to drive a wedge between the United States and Japan. They want to portray Japan as a problem for the U.S. in the same way that the U.S. might think of Israel and the Middle East, when you think about the U.S.-Iran deal that is presently being discussed. China has been engaged on a charm offensive with the United States of late. They've agreed to a bilateral investment treaty which the U.S. has been trying to get them to sign on for for years now. A multilateral trade and services agreement when Vice President Biden went to China recently. He got a two hour meeting with President Xi Jinping, which is unheard of.

So clearly the Chinese want to engage with Americans in a serious way. There are a lot of reasons for that. The U.S. economy is picking up. But also they see a window here because all of the hawks on China are gone from the U.S. administration. Hillary's gone, Kurt Campbell's gone, Geithner much more focused on this region is gone, and Donilon's gone. And so they see an opportunity with Biden effectively leading U.S.-China relations right now to build the U.S.-China relationship while really changing the rules on the ground with Japan.

How will the administration react?

So far the China strategy has been pretty successful. When the Chinese announced the Air Defense Identification Zone in the East China Sea, the Japanese response was to tell the Japanese airlines that "You don't respect it, you don't tell the Chinese." The Americans, instead of coordinating a joint response with Japan, which they explicitly did not do, the State Department with the support of the White House told American airlines "Well yes, we don't recognize it but you should file with China." And the Chinese immediately deplored the Japanese response as belligerent but praised the American response as constructive.

When Prime Minister Abe visited the Yasukuni War Shrine in the past month, the American public response was pretty negative. If you're China, and you're looking at the impact of what's been clearly a much more belligerent Chinese stance toward Japan (and vice versa) you see it's working. What I see happening right now is a concerted effort by the Chinese government to get the Japanese to say things that will help paint them as militarist and a foreign policy problem for a U.S. administration that doesn't want foreign policy problems. Look at the way they react to Syria, Libya, Egypt. This is an administration that is risk-averse, that is acting tactically, and that absolutely wants to keep their big relationships on a pretty balanced footing. To the extent that China can show success there, especially when there are no serious big Japan hands in Washington right now working with Obama, they might actually have some room to roll here. The problem is that the China-Japan relationship is a very big one economically. Japan has 23,000 companies in China, they have 10 million Chinese workers on their rolls. But the Japanese companies are actively diversifying away from China now. FDI [Foreign Direct Investment] numbers have gone way down, they're going instead to South East Asia and other parts of the world. If the Chinese and Japanese start thinking this economic relationship is deteriorating, and that's what brought them together, the potential for greater confrontation is rising. I'm not somebody who thinks we're going to see war.

I think war is very unlikely. In other words, neither country intends to go to war against the other. But, when you have every day fighters being scrambled to deal with Chinese quote-unquote incursions into what the Japanese consider to be their territory, the potential for a mistake is much larger. And given how bad the relations are between these two countries, if there is a mistake, God forbid there is an inadvertent military dust-up, they're going to assume the worst of the other side's intentions.

And given how bad the relations are between these two countries, if there is a mistake, God forbid there is an inadvertent military dust-up, they're going to assume the worst of the other side's intentions.

And you have to understand, these are two countries, there is no diplomatic outreach going on between the two countries. The United States is not playing a role to help facilitate that relationship. This is a place where history is in no way shared. There is no one in Japan that is trying to see the world from China's perspective. And there's no one in China trying to see the world from Japan's perspective. And they hate each other. According to a recent poll taken by Pew Research, only 6% of Chinese had a favorable view of Japan, only 5% of Japanese had a favorable view of China. This is actually a pretty serious issue.

Let's talk about Iran. How did Rouhani do in Davos? Are we seeing a breakthrough?

I'm probably more optimistic than most, but I think that anyone that saw Rouhani's speech or has met with either Rouhani or the oil minister or the foreign minister here over the last few days definitely believes that the Iranians are serious. That they want to get an economic deal. These sanctions have absolutely crippled the Iranian economy, and Rouhani was put in place with the singular mission of turning the economy in around. And anyone that heard his speech, anyone that has heard his meetings with the press, anyone that has been involved in his bilaterals or multi-laterals and I've been involved in them, sees that that is his consistent message.

They were disinvited from the peace talks in Geneva and he explicitly, both privately and publicly, has avoided talking about it, hasn't taken umbrage. And the reason for that is that they don't want to distract from getting this deal. You never would have seen that if they weren't taking this seriously. They would have used that to score points and to gain support. I think there's a pretty good chance. There are still a lot of people who hate this deal. The Congress is very skeptical, the Israeli's don't like it, the Saudis absolutely hate it.

Do you think it's a good deal?

It's a bad deal for Saudi Arabia. It depends on whose perspective you have. If you're Saudi Arabia, oil prices go down, the Iranians become more powerful in the region. GCC may split. The Iranians, on the other side of Saudi Arabia on every issue that matters in the region. You talk about Syria, Egypt, Iraq, Lebanon. So for the Saudis it's a bad deal. If I were a Saudi prince and you were asking me that question, "Is it a good deal or bad deal?" It's a bad deal. If you ask me from the American position, from the position of Obama that's trying to get out of the Middle East, have less exposure there, and also wants a policy win, and not to mention that would like oil prices down, it's a fantastic deal.

What about Israel?

Israel should deal with it, and I think they will. Unlike Saudi Arabia, Israel's not worried about high oil prices or low oil prices as much. The Israeli's are surrounded by geopolitical foes anyway.

Israel should deal with it, and I think they will. Unlike Saudi Arabia, Israel's not worried about high oil prices or low oil prices as much. The Israeli's are surrounded by geopolitical foes anyway

They have 100 nuclear weapons. The role that the Israelis are playing here is to agitate as much as possible to ensure that the foreign policy community maintains a tough, tough line on Iran so that the deal that eventually gets cut if it gets cut is going to be the toughest deal possible, the most advantageous for Israeli security. They've done a reasonably good job in my view, for a country of 7 million people, they've done a reasonably good job of getting that to happen. But if a deal actually gets done, the Israelis will deal with us.

This year one of the big themes is economics taking a back seat to politics. What's going on? Is it that geopolitics are that crazy or is it that there is economics fatigue.

It's a little more the latter. I think for the last 5 years we've been in the midst of various economic implications directly directed to the financial crisis and the eurozone. First of all, in 2009 just the question of where the financial sector globally was going. Eurozone crisis, fiscal crisis, debt limit crisis in the U.S. In all those places it turned out that while politics may be dysfunctional, they actually were insufficiently dysfunctional to allow things to really head negatively. So the fact is, the politics in the U.S. and Japan and Europe are pretty stable. Now that we haven't had to worry about that anymore, there's no one here that's worried about the Eurozone collapse anymore. Actually, U.S. governance is not doing very much this year, which is perfectly fine for the attendees of Davos. The consensus on U.S. growth is probably stronger than the market consensus. I'd say it's 3% or more among Davos attendees. So what are the things people are worrying about? Well, the politics are very interesting here. And they're interesting in some cases in a negative way (China-Japan) and some cases in a positive way (Iran).

But I think they are most interesting because people are wondering what this world order looks like. I mean the theme for Davos this year is reshaping the world. But the fact of the matter is that the world is not being reshaped. For the world to be reshaped the United States would have to play a role in reshaping it but it's not. U.S. foreign policy is still very much risk-averse and not a priority for the American president.

I mean, Obama was elected not to do foreign policy. And in that regard, he's doing a good job.

I mean, Obama was elected not to do foreign policy. And in that regard, he's doing a good job.

Take that as you will. There's nobody else out there… you're familiar with my G-zero concept? Reshaping the world implies we're constructing something that's getting us out of the G-zero. It is way too early for that. That is aspirational, it's not real.

Finally, what's a an important story that nobody is talking about?

No one is talking about North Korea. There's no North Korean delegation here as you know. They don't play much basketball in Switzerland, that's part of the problem. The guy executed his uncle. The Chinese themselves are very worried. Nobody is talking about it. This is regime that could implode. And when it does, we're going to have a very serious problem on our hands in the East China Sea.

We're going to have a very serious problem on our hands in East Asia. It's not as if I have a crystal ball on this issue, but there's no question that if you watch Kim Jong Un and you look at the way that he has portrayed himself and his regime to his people in a totalitarian state, he has not given any confidence to believe that he knows how to run a totalitarian state for a period of time. I think that should concern us.